Divided by shale, only some U.S. states win: Kemp

LONDON, Oct 27 (Reuters) - Thanks to shale, energy-producing
states have been the strongest economic performers in the United
States over the past decade, sharply improving their position
compared with the energy-consuming states.

Only 13 of the 50 states produced more energy than they
consumed in 2010, the latest year for which comprehensive data
is available, according to the U.S. Energy Information
Administration (EIA).

The other 37 were all net energy consumers, relying on some
combination of interstate commerce or imports to meet the
shortfall (Chart 1).

The shale revolution and the renaissance in U.S. oil and gas
production have resulted in a stark contrast between the
fortunes of the two groups.

Eight of the 13 energy-producing states improved their
relative position between 2003 and 2013 when ranked by per
capita gross domestic product (Chart 2). They accounted for
almost half of the 18 states that rose in the rankings.

By contrast, energy-consuming states have fared poorly. None
of the 10 states with the largest energy deficits has improved
its relative economic position since 2003. Nine of them have
fallen in the ranking, in some cases sharply (Chart 3).

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Chart 1: http://link.reuters.com/fej33w

Chart 2: http://link.reuters.com/hej33w

Chart 3: http://link.reuters.com/kej33w

Chart 4: http://link.reuters.com/nej33w

Chart 5: http://link.reuters.com/rej33w

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ONE ENORMOUS WINNER

Energy producers also dominate in terms of raising real
output per capita over the last decade, accounting for six of
the 10 states with the biggest increases (Chart 4).

But none of them can rival North Dakota. Thanks to shale,
the Peace Garden State has been (by far) the biggest winner,
with per capital GDP up by more than 67 percent since 2003,
compared with nationwide increase of just 7 percent (Chart 5).

Rapid income growth has catapulted North Dakota up the
prosperity league. In 2003, state GDP per capita was ranked just
33rd in the nation, at just $41,000. By 2013, per capita GDP had
soared to almost $69,000, putting it second only to Alaska.

In 2011, North Dakota's per capita GDP overtook California
for the first time, and in 2013 it was more than $18,000 (29
percent) higher.

Among the energy-producing states, only Colorado fell in the
rankings, down seven places from 10th to 17th, with per capita
GDP growing less than 5 percent since 2003.

And the energy revolution bypassed Kentucky and West
Virginia. Their coal-based economies failed to lift them out of
relative deprivation, leaving them ranked 43rd and 47th,
respectively.

WINNERS AND LOSERS

It would be wrong to imply that energy production has been
the only cause of success and failure among the states.

Some of the top performers are sparsely populated
single-industry economies where rising prices and production of
energy could easily lift GDP per capita. In that respect, the
huge GDP gains in Texas are all the more remarkable.

By contrast, some of the worst performers, such as
California and Florida, were at the centre of the subprime
housing boom and bust and have yet to recover.

Net energy-consuming states tend to have far larger
populations and more diversified economies that are less
affected by the cyclical performance of any single industry.

And recent declines in energy prices will tend to shift the
balance back from producing to consuming states to some extent.

But there is no denying that the shale revolution has lifted
the economic fortunes of the main energy-producing states
significantly compared with the rest.

The energy boom has driven favourable shifts in employment,
tax revenues and broader economic activity for the states
concerned, and it is starting to show up in the political
balance of power, too.

The Obama administration and congressional Democrats have
struggled to identify themselves with the success of the shale
revolution, given the party's reputation as anti-fossil fuels.

That is piling on the pressure on the remaining elected
Democrats in energy-producing states and leaving the party
struggling elsewhere as voters question whether it is committed
to local growth and job creation.

If the Democratic Party loses its control of the U.S. Senate
following the mid-term elections, a small but significant part
of the reason will be because it has found itself on the wrong
side of the energy revolution.

Shale has remade the world in the past decade, but it is
also remaking the United States, reshaping the contours of the
economy and politics.
(editing by Jane Baird)